Scale-down in Infrastructure plan by quarter billion in 12th Plan period
Going by the current trend of GDP growth, there is every possibility that India’s trillion-dollar infrastructure plan may fall short by upto a quarter billion. According to analysts, restructuring of the average GDP growth to 6-6.5 % is on the cards during the 12th Plan period (2012-17). This would invariably mean scaling down the infrastructure expenditure to US$750 billion.
Current trend a jolt to the 12th Plan outlay:
This startling revelation comes in the backdrop of both the Prime Minister and the Finance Minister reiterating that they would go ahead with the US$1 trillion infrastructure investment plan. Moreover, serious efforts were made in this direction with regards to fast-tracking many mega infrastructure projects that had been stalled for long.
Progress of projects cleared by CCI and PMG stalled:
It can be recalled that the newly installed Cabinet Committee on Investments (CCI) had cleared mega infra projects worth Rs.3.5 crore. Besides, the Project Monitoring Group (PMG) formed by the Prime Minister had approved projects worth a similar value. However, despite the CCI clearances being granted for these projects, about 6-8 months back, none of them seem to have progressed any further.
Slowdown in economy and policy paralysis prove counter-productive:
Incidentally, US$500 billion worth of infra projects were carried out during the 11th five year plan period, ending 2012. Owing to the slowdown in the economy as well as the policy paralysis witnessed in the last 3-4 years, this figure can be scaled by at the most 50%. This would mean than the maximum investment on infra projects during the 12th plan period is expected to be around US$750 billion.
Availability of funds not a hindrance:
In order to assuage the fears of investors with regards to the availability of funds for infra projects, a finance ministry official reassured investors by stating that there would be no paucity of funds. Funds for infra projects would be made available as and when required. However, apprehensions remained with regards to the capacity of infra projects that can absorb these funds.
Growth recorded in first two years of 12th plan hardly 5%:
During the initiation of the 12th plan, in 2012, the growth was envisaged to be about 8%. However, this figure was later pegged down to 6-6.5% for obvious reasons, with the growth recorded in the first two years being hardly 5%. Due to this slowdown in growth, even if infrastructure investments to the tune of US$1 trillion are attracted, they may not be put to adequate use. In this context, it can be stated that inspite of CCI and PMG fast-tracking many projects recently, the infra companies executing them were not willing to go ahead due to the adverse circumstances currently prevailing.
Land bill gives hope for stalled infra projects:
Most of the projects that were inordinately delayed were due to issues with regards to land acquisition, forest and environmental clearances. However, there is hope that the land acquisition bill would be cleared soon, considering that it is one of the flagship bills of the UPA government. Even though the notification on land acquisition is yet to be issued, the new land bill has given hope that many of the stalled infra projects would get off the block in the immediate future.
Road projects stalled due to issues related to clearances:
The issues involved with the power sector was responsible for many of the infrastructure projects being stalled due to the obvious link between the two sectors. Many road projects were stalled due to reasons besides land acquisition, like due to the want of forest and environmental clearances. A case in point is with regards to the much-hyped golden quadrilateral project which was proposed to connect Delhi, Kolkata, Chennai and Mumbai, along with the two diagonals. The project was still in limbo even thirteen years after work was initiated, due to inconveniences faced along certain stretches of the proposed route.
Higher growth rate plan could lead to inflation:
It was also felt that attempts to achieve a 11th Plan growth rate of 9% would seem futile at this point in time. The best that could be attempted would be 8%. Anything beyond this would lead to a high and unmanageable inflation. In this context, it is imperative that infrastructure development be scaled down. However, the Delhi-Mumbai corridor project could considerably push infrastructure expenditure up than what is expected.
